Ultimate Software Group announced that it agreed to be acquired by an investor group led by Hellman & Friedman Capital Partners in a deal valued at about $11 Billion. Hellman & Friedman is a private equity fund that makes large-market buyout investments in the communications, consumer discretionary, financials, health care, industrials, and technology sectors. Other investors in the group include Blackstone Group, GIC, Canada Pension Plan Investment Board and JMI Equity.
Ultimate Software, the maker of cloud-based HRM software, will now be a private company. All shareholders will receive $331.50 per share in cash, the company announced in a statement. The terms represent a premium of about 32% over the company’s average stock price during the 30 days ended February 1. Ultimate share price rose 20& in New York trading following the announcement.
Weston, Florida-based Ultimate Software was founded in 1990 by Scott Scherr, who will remain at the company along with the existing senior management team.
Payroll and human resources software “is a very attractive space to invest in”, Jefferies analyst Samad Samana said. “It has very attractive characteristics – high retention rates. Everybody needs payroll, so it’s a very large market.”
Deutsche Bank analyst Michael Turrin called Ultimate Software a top “value” pick, based on its early transition to the cloud and strong workplace culture. He said the company “has proven itself capable of delivering consistent 20 per cent-plus recurring revenue growth and operating margin.”
Ultimate Software was ranked #1 on Fortune’s Best Workplaces in Technology list for the fourth consecutive year, #5 on Fortune’s List of Best Workplaces for Diversity, #4 on Fortune’s List of the 50 Best Workplaces for Parents, and #1 Best Place to Work in IT by Computerworld.
Samana said he wouldn’t be surprised to see another company potentially make a bid for Ultimate Software. “The difference for a strategic buyer is there could be potential revenue and cost synergies that would make the deal more valuable for them than for a private equity buyer,” he added.
Ultimate Software is presently the second-fastest growing provider, behind Workday Inc, in the $17 Billion human-capital management and payroll-software market. The deal with Hellman will help Ultimate make additional investments in products and services, as well as rewarding employees, the company said.
